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Home > Newsletters > Trade Research > Trade Newsletter - Summer 2009
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Trade Newsletter - Summer 2009

Contents

A. Introduction
B. Special Feature
C. Recent Trade Working Papers
D. Working Paper Abstracts

A. Introduction

Welcome to the 51st issue of the World Bank Trade Research Electronic Newsletter, a periodic E-mail publication containing abstracts of recent trade working papers, publications and other works. Additional information on the Bank’s Trade Research Team activities can be found on the recent redesigned World Bank Trade Research website (http://www.econ.worldbank.org/programs/trade). This provides basic information on research activities in progress, trade working papers, other Bank trade publications, trade newsletters and links to other trade related web sites. You may also visit the periodically updated website of the International Trade Department at http://www.worldbank.org/trade for additional information on trade and development, including the World Bank Institute’s activities in the area of capacity-building and training, the Integrated Framework for Trade-related Technical Assistance, periodic “Trade Notes" on topics of current interest and recent events and projects. If you do not wish to receive this electronic bulletin, please send an E-mail message with “Unsubscribe” in the title area to trade@worldbank.org. 

All of the working papers listed below are available for downloading from the website in the Adobe Acrobat format at the address:  http://www.econ.worldbank.org/programs/trade.


B. Special Feature

1. Second International Migration and Development Conference

The World Bank, jointly with Agence Française de Développement (AFD), organized the Second International Migration and Development Conference on September 10-11th, following the first conference in Lille, France in June 2008.  The conference program included 38 papers including two keynote addresses via parallel sessions and covered a wide range of issues on the development and the migration nexus.   Among the topics were migration and institutions, illegal migration, link between poverty and migration, human capital formation and migration, self-selection, migrant networks and social externalities. Some of the papers offered new evidence on some of the “old” topics in the migration debate such as poverty and macro impacts of remittances. Other papers investigated emerging topics such as the impact of migration on political accountability in home countries and the differential behavior of undocumented migrants. There were several papers introducing datasets such as the new Global Bilateral Migration Database, 1960-2000, an output of DECRG. The two keynote addresses were delivered by George Borjas of Harvard University and L. Alan Winters, Chief Economist of Department of International Development (DFID), UK and the former Director of Research at the Word Bank. Borjas’ paper aimed to present a unified theoretical framework to analyze wage effects of migration. Winters’ presentation on the other hand was devoted to the discussion of the impact of past and present economic crises on migration patterns and presented fascinating historical information to guide current policy dilemmas. Presentations were followed by discussions and exchanges that offered contributions to presenters and identified further research questions. Conference program, the papers and the presentations can be accessed from the Second International Migration and Development Conference website.

There will be a full issue of the World Bank Economic Review devoted to a select group of papers from the conference. The issue will be edited by the organizers of the conference, Caglar Ozden (World Bank), Maurice Schiff (World Bank) and Hillel Rapaport (Bar Ilan University and currently visiting Harvard University). The special issue is scheduled to come out in Fall 2010. AFD agreed to co-sponsor an annual conference on Migration and Development in cooperation with the World Bank for the foreseeable future. The next conference will be held at the Paris School of Economics, hosted by Francois Bourguignon, former Chief Economist of the World Bank in June 2010.

2. Trade and the Current Crisis
by Caroline Freund, Leonardo Iacovone, Veronika Zavacka, Ingo Borchert, and Aaditya Mattoo, World Bank Research Digest, Vol. 3, No. 4, Summer 2009.

Trade is one of the more visible victims of the current economic crisis. Three new studies explore the growing sensitivity of trade to change in income, the adverse effects of the financial crisis, and the relative resilience of service trade.  The results from these studies include several dimensions as follow: (i) the responsiveness of trade to income has risen over time, and tends to be higher during global downturns; (ii) financial crises can exacerbate downturns in trade flows through adverse supply-side effects on exporters; and (iii) service trade has weathered the crisis much better than goods trade. For more info and additional report from the Economist magazine, please visit the following web pages:

3. Distortions to Agricultural Incentives in Africa
by Kym Anderson and William A. Masters, World Bank Publication, March 2009, 618 pages.

This volume is the third in a series that not only fills that void for recent years but extends the estimates in a consistent and comparable way back in time's and provides analytical narratives for scores of countries that shed light on the evolving nature and extent of policy interventions over the past half-century. This title provides an overview of the evolution of distortions to agricultural incentives caused by price and trade policies in the Arab Republic of Egypt plus 20 countries that account for about of 90 percent of Sub-Saharan Africa's population, farm households, agricultural output, and overall GDP. Sectoral, trade, and exchange rate policies in the region have changed greatly since the 1950s, and there have been substantial reforms since the 1980s. Nonetheless, numerous price distortions in this region remain, others have been added in recent years, and there has also been some backsliding, such as in Zimbabwe. The new empirical indicators in these country studies provide a strong evidence based foundation for assessing the successes and failures of the past and for evaluating policy options for the years ahead.

Table of Contents
PART I:  INTRODUCTION
1.  Introduction and Summary - Kym Anderson and William A. Masters 

PART II:  NORTH AFRICA
2.  Arab Republic of Egypt - James Cassing, Saad Nassar, Gamal Siam, and Hoda Moussa

PART III:  SOUTHERN AFRICA
3.  Madagascar - Fenohasina Maret
4.  Mozambique - Andrea Alfieri, Channing Arndt, and Xavier Cirera
5.  South Africa - Johann Kirsten, Lawrence Edwards, and Nick Vink
6.  Zambia - Peter Robinson, Jones Govereh, and Daniel Ndlela
7.  Zimbabwe - Daniel Ndlela and Peter Robinson

PART IV:  EASTERN AFRICA
8.  Ethiopia - Shahidur Rashid, Meron Assefa, and Gezahegn Ayele
9.  Kenya - Alex Winter-Nelson and Gem Argwings-Kodhek
10. Sudan - Hamid Faki and Abdelmoneim Taha
11. Tanzania - Oliver Morrissey and Vincent Leyaro
12. Uganda - Alan Matthews, Pierre Claquin, and Jacob Opolot

PART V:  WESTERN AFRICA
13. Cameroon - Ernest Bamou and William A. Masters
14. Côte d’Ivoire - Philip Abbott
15. Ghana - Jonathan Brooks, Andre Croppenstedt, and Emmanuel Aggrey-Fynn
16. Nigeria - Peter Walkenhorst
17. Senegal - William A. Masters
18. Benin, Burkina Faso, Chad, Mali, and Togo - John Baffes

Appendix A: Methodology for Measuring Distortions to Agricultural Incentives -
Kym Anderson, Marianne Kurzweil, Will Martin, Damiano Sandri, and Ernesto Valenzuela

Appendix B: Annual Estimates of Distortions to Agricultural Incentives in Africa -
Ernesto Valenzuela, Marian Kurzweil, Johanna Croser, Signe Nelgen, and Kym Anderson

4. Trade Facilitation, the Crisis and SMEs in East and South Asia

The Development Research Group co-sponsored a forum on "Trade Facilitation and SMEs in a Time of Crisis " in Beijing, China on May 20-22, in cooperation with UNESCAP and the China Council for the Promotion of International Trade. This unique event brought together 60 government representatives and private sector officials from 16 countries across East and South Asia to discuss the importance of trade facilitation vis-à-vis the need of SMEs, in regard to (i) crisis recovery and (ii) longer term development. The participants offered specific recommendations based on past experiences in the region in the areas of trade finance, IT based  trade facilitation measures, customs reform and trade logistics. It also suggested that the governments should take steps, among others, to facilitate trade credits for infrastructure via international intermediaries and/or extend roles of existing ones for SMEs. A series of case studies on IT based trade facilitation measures conducted by an ARTNet Project suggested that diffusion and access to IT can significantly reduce trade costs and improve SMEs’ performance.  The studies also proposed that partial IT-based systems should be completed, parallel systems should be fixed, and the use of IT should be promoted beyond customs to all government agencies and beyond national capitals to the borders. The participants emphasized the importance of public-private partnership, human resource management, and border agency cooperation in the success of customs administration reforms and trade logistics enhancements. At the center of the discussions was that strengthening IT services and the public-private partnerships can contribute to reform and economic recovery. The research and operational agenda for trade facilitation facility (TFF) of the World Bank was also presented during a special round-table discussion, including an overview of the TFF agenda and an outline of the regional operational prospects. Additional information on this on-going research can be accessed at the web below. For more info, please contact either John S. Wilson at jswilson@worldbank.org or Yue Li at yli7@worldbank.org.


5. Book Chapters, Journal Articles and Other Publications 

  • Harrison, Ann and Andres Rodriquez-Clare (2009), “Trade, Foreign Investment, and Industrial Policy for Developing Countries,” Chapter 63, Handbook of Development Economics 5, D. Rodrick and M. Rosenzweig (eds.), Elsevier: North-Holland.

    Download the book | Purchase the book  

  • Harrison, Ann and Jason Scorse (2009), “Do Foreign-Owned Firms Pay More? Evidence from the Indonesian Manufacturing Sector,” Chapter 16, Labor Markets and Economic Development, edited by R. Kanbur and J, Svejnar, Routledge, Taylor & Francis Group: London, New York.

  • Hoekman, Bernard, Will Martin and Carlos Primo Braga (2009), “Quantifying the Value of Preferences and Potential Erosion Losses,” Chapter 1, Trade Preference Erosion Measurement and Policy Response, Bernard Hoekman, Will Martin and Carlos Primo Braga (eds.), A copublication of Palgrave Macmillan and the World Bank.

    Ozden, Caglar and Paul Brenton (2009), “Trade Preferences for Apparel and the Role of Rules of Origin,” Chapter 10,  Trade Preference Erosion Measurement and Policy Response, Bernard Hoekman, Will Martin and Carlos Primo Braga (eds.), A copublication of Palgrave Macmillan and the World Bank.

  • Hoekman, Bernard and Susan Prowse (2009), “Economic Policy Response to Preference Erosion: From Trade as Aid to Aid for Trade,” Chapter 11, Trade Preference Erosion Measurement and Policy Response, Bernard Hoekman, Will Martin and Carlos Primo Braga (eds.), A copublication of Palgrave Macmillan and the World Bank.

  • Bown, Chad (2009), “Antidumping, Safeguard, and Other Trade Remedies,” Chapter 6, The Fateful Allure of Protectionism: Taking Stock for the G8, S. Evenett, B. Hoekman and O. Cattaneo (eds.), A copublication of CEPR and the World Bank.

  • Mattoo, Aaditya amd Ingo Borchert (2009), “ Services (A Case Study of the United States),” Chapter 17, The Fateful Allure of Protectionism: Taking Stock for the G8, S. Evenett, B. Hoekman and O. Cattaneo (eds.), A copublication of CEPR and the World Bank.

  • Mattoo, Aaditya (2009), “Exporting Services,” Chapter 9, Breaking into New Markets: Emerging Lessons for Export Diversification, R. Newfarmer, W. Shaw and P. Walkenhorst (eds.), Washington, DC: World Bank.

  • Wilson, John S. and Alberto Portugal-Perez (2009), “Why Trade Facilitation Matters to Africa,” World Trade Review, 8(3): 379-416, July.

  • Javorcik, Beata S. and Mariana Spatareanu (2009), “Liquidity Constraints and Firms' Linkages with Multinationals,” World Bank Economic Review, 23(2): 323-346, June.

  • Finger, J Michael (2009), “The Genesis of the GATT,” Journal of World Trade, 43(4): 893-901.

  • Kee, Hiau Looi (2009), "The Coefficient of the Whole is an Average of the Coefficients of its Parts: A Special Case of Restricted Least Squares," Economics Letters, 104(3): 136-139, September.

  • Porto, Guido, Jorge Balat, and Irene Brambilla (2009), “Realizing the Gains from Trade: Export Crops, Marketing Costs, and Poverty,” Journal of International Economics, 78(1): 21-31, June.

  • Iacovone, Leonardo and Veronika Zavacka (2009), Banking crises and exports: Lessons from the past, VoxEU-Global Crisis Debate (CPER), September 1.

  • Harrison, Ann (2009), New evidence on international trade, offshoring, and US wages, VoxEU-Global Crisis Debate (CPER), August 31.

  • Harrison, Ann and Andres Rodriquez-Clare (2009), Trade, foreign investment, and industrial policy for developing countries, NBER Working Paper, No. 15261, August.

  • Harrison, Ann, Avraham Ebenstein, Margaret McMillan and Shannon Phillips (2009), Estimating the impact of trade and offshoring on American workers using the current population surveys, NBER Working Paper, No. 15107, June.

C.  Recent Trade Working Papers


D. Working Paper Abstracts

  • Services in Doha: what's on the table? - Batshur Gootiiz, Aaditya Mattoo

    This paper attempts to assess what is on the table in Doha Round. It presents the results of the first survey of applied trade policies in the major services sectors of 56 industrial and developing countries. These policies are then compared with these countries' Uruguay Round commitments in services and the best offers that they have made in the current Doha negotiations. The paper finds that at this stage, Doha promises greater security of access to markets but not any additional liberalization. Uruguay Round commitments are on average 2.3 times more restrictive than current policies. The best offers submitted so far as part of the Doha negotiations improve on Uruguay Round commitments by about 13 percent but remain on average 1.9 times more restrictive than actual policies. The World Trade Organization's Hong Kong Ministerial had set out ambitious goals for services but the analysis here shows that much remains to be done to achieve them.

  • Weathering the storm: investing in port infrastructure to lower trade costs in East Asia, Kazutomo Abe, John S. Wilson

    The world economic crisis of 2008 presents clear challenges to prospects for economic growth in developing countries. This is particularly true for emerging economies in East Asia that have relied to a great extent over the past decade on export-led growth. What steps to facilitate trade promise a relatively strong return on investment for East Asia to help sustain trade and growth? The authors examine how port infrastructure affects trade and the role of transport costs in driving exports and imports for the region. They find that port congestion has significantly increased the transport costs to East Asia from both of the United States and Japan. The analysis suggests that cutting port congestion by 10 percent could cut transport costs in East Asia by up to 3 percent. This translates into a 0.3 to 0.5 percent across-the-board tariff cut. In addition, the estimates suggest that the trade cost reduction of investment in port infrastructure in East Asia that translates into higher consumer welfare would far outweigh the cost for physical expansion of the ports in the region.

  • Beyond the information technology agreement: harmonization of standards and trade in electronics, Alberto Portugal-Perez, Jose-Daniel Reyes, John S. Wilson

    Product standards can have a dual impact on production and trade costs. Standards may impose additional costs on exporters as it may be necessary to adapt products for specific markets (cost-effect). In contrast, standards can reduce exporters' information costs if they convey information on industrial requirements or consumer tastes that would be costly to collect in the absence of standards (informational-effect). Using a new World Bank database of European standards for electronic products, the authors examine the impact of internationally-harmonized European standards on European Union imports. They find that EU standards for electronic products that are harmonized to international standards have a positive and significant effect on trade. The results suggest that efforts to promote trade in electronic products could be complemented by steps to promote standards harmonization. This might include, for example, re-starting talks to extend the Information Technology Agreement to non-tariff measures and commitments to harmonize national standards in electronic products. 

  • The crisis-resilience of services trade, Ingo Borchert, Aaditya Mattoo

    Much attention has focused on the impact of the current crisis on goods trade; hardly any on its impact on services trade. Using new trade data from the United States, and more aggregate data from other OECD countries, the authors show that services trade is weathering the current crisis much better than goods trade. Developing countries like India, which are relatively specialized in business process outsourcing and information technology services, have suffered much smaller declines in total exports to the United States than countries like Brazil and China and regions like Africa, which are specialized in exports of goods, transport services, or tourism services. On the basis of new evidence from Indian services exporters, the authors suggest that services trade is buoyant relative to goods trade for two reasons: demand for a range of traded services is less cyclical, and services trade and production are less dependent on external finance. Even though few explicitly protectionist measures have so far been taken in services, the changing political climate and the widening boundaries of the state in crisis countries may introduce a national bias in firms' procurement and location choices.

  • International migration, transfers of norms and home country fertility, Michel Beine, Frederic Docquier, Maurice Schiff

    This paper examines the relationship between international migration and source country fertility. The impact of international migration on source country fertility may have a number of causes, including a transfer of destination countries' fertility norms and an incentive to acquire more education. It provides provide a rigorous test of the diffusion on of fertility norms using original and detailed data on migration. The results provide evidence of a significant transfer of fertility norms from migrants to their country of origin: a one percent decrease in the fertility norm to which migrants are exposed reduces home country fertility by about 0.3 percent for origin countries.

  • A special safeguard mechanism for agricultural imports and the management of reform, J. Michael Finger

    The record of traditional safeguard provisions of the General Agreement on Tariffs and Trade and the WTO provides useful information about how a special agricultural safeguard might be made effective. The success of existing safeguard or flexibility provisions to sustain long-run liberalization programs stems from their requiring objective, transparent, and participatory decisions on the application of the import restrictions they allow. The proposed special agricultural safeguard expands by arithmetic formula the bounds within which a Member may impose a new import restriction. Analysis reported here suggests that the formulas provide a poor guide for policy, indicating that they would frequently prescribe action that is not needed and fail to prescribe action when it would be appropriate. To be useful, the special agricultural safeguard should do more than provide formulas for import restrictions. It should provide for objective and participatory processes that would bring forward relevant information and guide an objective and balanced accounting of the interests at play.

  • The better you are the stronger it makes you: evidence on the asymmetric impact of liberalization, Leonardo Iacovone 

    This paper studies how liberalization affects productivity growth using micro-level plant data. It focuses on analysis of not only the average impact of liberalization, but also goes "beyond the average" and shows how the liberalization can affect dissimilar plants in a different way. The author first develops a model which predicts that, while the impact of liberalization on productivity growth is positive "on average", more advanced firms tend to benefit more. In fact, liberalization generates two competing effects: on one side it spurs more innovative efforts because of the increased entry threat by foreign competitors, on the other side, enhanced competition curtails expected profits and reduces the funds available to finance innovative activities. The pro-competitive effect is weaker for less advanced firms as for them it is harder to catch-up with the "technology frontier". These predictions are then tested focusing on Mexican plants during the NAFTA liberalization. The results show that a 1 percent reduction in tariffs spurred productivity growth between 4 and 8 percent on average. However, for backward firms this effect is much weaker if not close to zero, otherwise for more advanced ones this effect is stronger with productivity growing between 11 and 13 percent. Consistent with the theoretical model the results are stronger in those sectors where the scope for innovative activities is more pronounced.

  • Labor skills and foreign investment in a dynamic economy: estimating the knowledge-capital model for Singapore, Gnanaraj Chellaraj, Keith E. Maskus, Aaditya Mattoo 

    Singapore is an interesting example of how the pattern of foreign investment changes with economic development. The authors analyze inbound and outbound investment between Singapore and a sample of industrialized and developing countries over the period 1984-2003. They find that Singapore two-way investment with industrialized nations has shifted into skill-seeking activities over the period, while Singapore investments in developing countries have increased sharply and become concentrated in labor-seeking activities. Singapore increasing skill abundance relative to all countries in the sample accounted for 41 percent of average inbound stocks during the period, that is, US$18 billion annually; the corresponding figure for outbound stocks was 40 percent, that is, US$5.51 billion annually.

  • The ASEAN free trade agreement: impact on trade flows and external trade barriers, Hector Calvo-Pardo, Caroline Freund, Emanuel Ornelas

    Using detailed data on trade and tariffs from 1992-2007, the authors examine how the ASEAN Free Trade Agreement has affected trade with nonmembers and external tariffs facing nonmembers. First, the paper examines the effect of preferential and external tariff reduction on import growth from ASEAN insiders and outsiders across HS 6-digit industries. The analysis finds no evidence that preferential liberalization has led to lower import growth from nonmembers. Second, it examines the relationship between preferential tariff reduction and MFN tariff reduction. The analysis finds that preferential liberalization tends to precede external tariff liberalization. To examine whether this tariff complementarity is a result of simultaneous decision making, the authors use the scheduled future preferential tariff reductions (1992) as instruments for actual preferential tariff changes after the Asia crisis. The results remain unchanged, suggesting that there is a causal relationship between preferential and MFN tariff reduction. Overall, the results imply that the ASEAN agreement has been a force for broader liberalization.

  • Diasporas, Michel Beine, Frederic Docquier, Caglar Ozden

    Migration flows are shaped by a complex combination of self-selection and out-selection mechanisms. In this paper, the authors analyze how existing diasporas (the stock of people born in a country and living in another one) affect the size and human-capital structure of current migration flows. The analysis exploits a bilateral data set on international migration by educational attainment from 195 countries to 30 developed countries in 1990 and 2000. Based on simple micro-foundations and controlling for various determinants of migration, the analysis finds that diasporas increase migration flows, lower the average educational level and lead to higher concentration of low-skill migrants. Interestingly, diasporas explain the majority of the variability of migration flows and selection. This suggests that, without changing the generosity of family reunion programs, education-based selection rules are likely to have a moderate impact. The results are highly robust to the econometric techniques, accounting for the large proportion of zeros and endogeneity problems. 

  • Adjusting to trade-policy changes in export markets: evidence from U.S. antidumping duties on Vietnamese catfish, Irene Brambilla, Guido Porto, Alessandro Tarozzi

    In 2003 the United States imposed anti-dumping tariffs on imports of catfish from Vietnam ranging from 37 to 64 percent. As a result, Vietnamese exports of catfish to the U.S. market declined sharply, thus providing a unique opportunity to study the effects of U.S. trade policy changes on Vietnamese families. Using data on Vietnamese households, the authors study the responses of catfish producers in the Mekong delta of Vietnam between 2002 and 2004. The evidence suggests that the rate of growth of income of households that depended on catfish sales was significantly affected. In addition, the anti-dumping duties triggered significant exit from catfish farming. Households adjusted by moving out of catfish aquaculture and into wage labor markets and agriculture, but not into other aquaculture activities. Finally, the evidence also suggests that households found it difficult to change their catfish production levels, and that performance in aquaculture affects other household economic activities.

  • Competition, imitation, and technical change: quality vs. variety, Ana Cusolito

    This paper explores the role of product market competition and intellectual property rights protection in the pattern of sectoral diversification. The paper confirms the insight of the innovation literature, that competition induces firms to specialize and upgrade the quality of existing goods. However, it reveals a new force, called the imitation effect, through which competition biases technical change toward product diversification. The paper shows that if knowledge spillovers increase with imitation, or the degree of product substitution is high, weak protection of property rights encourages firms to create low-quality goods, thereby directing technical change toward diversification. The predictions are tested with data on Italian firms' innovation activity. They are found to be consistent with observed behavior.

  • The trade response to global downturns: historical evidence, Caroline Freund

    The author examines the impact of historical global downturns on trade flows. The results provide insight into why trade has dropped so dramatically in the current crisis, what is likely to happen in the coming years, how global imbalances are affected, and which regions and industries suffer most heavily. The author finds that the elasticity of global trade volumes to real world GDP has increased gradually from around 2 in the 1960s to above 3 now. The author also finds that trade is more responsive to GDP during global downturns than in tranquil times. The results suggest that the overall drop in real trade this year is likely to exceed 15 percent. There is significant variation across industries, with food and beverages the least affected and crude materials and fuels the most affected. On the positive side, trade tends to rebound very rapidly when the outlook brightens. The author also finds evidence that global downturns often lead to persistent improvements in the ratio of the trade balance to GDP in borrower countries.

  • Banking crises and exports: lessons from the past, Leonardo Iacovone, Veronika Zavacka

    This paper analyzes the impact of banking crises on manufacturing exports exploiting the fact that sectors differ in their needs for external financing. Relying on data from 23 banking crises episodes involving both developed and developing countries during the period 1980-2000 the authors separate the impact of banking crises on export growth from that of other exogenous shocks (i.e. demand shocks). Their findings show that during a crisis the export of sectors more dependent on external finance grow significantly less than other sectors. However, this result holds only for sectors depending more heavily on banking finance as opposed to inter-firm finance. Furthermore, sectors characterized by higher degree of assets tangibility appear to be more resilient in the face of a banking crisis. The effect of the banking crises on exports is robust and additional to external demand shocks. The effect of the latter is independent and additional to that of a banking shock, and is particularly significant for sectors producing durable goods.


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