An international trade model to capture linkages among supply-constrained economies

The development of a country's domestic and international markets depends on its own actions as much as on those of its trading partners. The study of market linkages is thus vital for policy making. Borrowing from the conceptual framework of Leontief's input-output analysis and from the national accounts equation, this paper presents a new model to calculate multilateral trade multipliers while minimizing data requirements. The novelty of the approach consists in the column-wise (supply-oriented) normalization of trade as opposed to the row-wise (demand-oriented) normalization that prevails in the literature. The explanatory power of the model has been successfully tested on data that refer to 1973–1974. Divergence from reality inevitably reflects the great fluidity that characterized trade during that period. Although most successful when applied to trade among supply-oriented economies (such as those of socialist or developing countries), at present empirical tests have been run only for a handful of OECD and OPEC countries.     

Trade, education, and innovation: Prospects for the U.S. economy

This paper examines international trade issues as vital indicators of the economic prospects of the United States and other developed economies. In particular, it challenges misuses of the doctrine of mutual gains from trade and instead argues that comparative advantage does not guarantee increases in benefits to both trading partners—especially when one partner seeks to distort the market mechanism in its favor. In the face of such mercantilist or protectionist practices, efforts to advance innovation, without retaining manufacturing jobs, will not ensure continued prosperity, as the number of jobs entailed in the invention process is small compared with the number of jobs associated with manufacturing an innovative product for mass consumption. These matters call for the urgent rethinking of trade policy by the United States and other developed nations, if they are to balance their imports and exports and ensure continued economic growth.     

Globalization: Country and company interests in conflict

Globalization has brought about fundamental change. But, the same theory that shows that free trade is beneficial also shows that globalization can be harmful to at least one of the trading countries. Moreover, with globalization, the interests of a country and its companies may diverge. In this paper, we examine free trade in a globalizing world and identify the key policy issues that economists and industrial leaders, alike, must address in today's interdependent world.     

A model for the coordination of recovery policies in the OECD region

The paper presents a world econometric model of the LINK type, which is then applied to the study of the recovery prospects of the OECD economies. Specifically, several policy packages coordinated at the international level are assessed for the period 1978–1980.The model includes country specific macroeconomic structures for eight developed economies, and different type structures for five additional developing countries. The obvious policy and behavioral differences that exist between these two groups of countries are highlighted through the specification, in one case, of demand-oriented Keynessian models able to capture short-term cyclical phenomena. The supply orientation with several resource gaps (savings, foreign exchange, etc.) prevails for the developing economies. The two sections after the introduction review broadly the main modeling features of the project, including the international comparison of structural parameters. In the following sections several policy experiments are attempted. The underlying behavioral assumptions stress the community of interest that prevails among OECD economies. These experiments consider the case of stimulative policies adopted in (1) the United States alone, (2) three engine countries (United States, Federal Republic of Germany, and Japan), and (3) several developed countries that are part of the OECD system. Other experiments assume additional policy packages to correct present current account imbalances. The general conclusion of the study is that the prospects for economic recovery in the OECD area depend to a crucial extent on the ability of the member countries to agree on policies able to make the major economic indicators of each economy converge toward levels that are domestically manageable and mutually supporting.     

The experience of the EEC Eurolink Project in modeling bilateral trade linkage equations

Following the basic philosophical approach of the LINK Project, which links various national econometric models built in different countries, the Commission of the European Communities has succeeded in linking the full-size quarterly econometric models of the four major European countries. The Eurolink Project is being extended to cover the other EEC countries as well as the United States, Canada, and Japan. The results reported in this paper are part of this larger project which attempts to link the EEC member economies in a trade and capital flows econometric model and explain the transmission of interdependent economic fluctuations from country to country. In the present study, the interconnection between the various economies is represented by bilateral trade flows only. Flows of invisibles and of financial capital are not completely studied and are not yet ready to be included in this report.The theoretical structural model with its bilateral trade supply and demand functions and the technique employed for the construction of bilateral import and export price indices are presented. Estimation results are shown and discussed with emphasis on their use for the analysis of international trade and for policy decision making.     

区域经济组织对全球贸易体制的挤出--基于中国视角的验证与对策

区域经济组织的兴起给多边贸易体制带来了一系列的挑战和冲击，其基本原因在于区域经济组织带来的积极影响以及多边贸易体制自身的消极因素，这些都为区域经济组织对多边贸易体制形成挤出效应埋下了隐患。这在现有所谓社会网络模型中得到充分验证。因此协调好二者之间的矛盾与冲突对于中国的贸易自由化和可持续发展就有着重大的意义。自从加入WTO以来，中国经济实力和贸易水平实现大幅度提升，中国有义务也有能力趋利避害，谋求消化区域经济组织对现有全球贸易体制的挤出效应，扭转两者零和博弈的内耗，进而追求自身与全球的经济贸易利益持续健康发展。     

亚洲区域经济合作新领域：区域月良务贸易自由化

在对16个亚洲经济体参与的32件区域服务贸易协定进行经验研究的基础上,本文基于与多边服务贸易体系相对照的视角,对亚洲经济体参与区域服务贸易自由化的机制进行分析,并对亚洲经济体在区域贸易协定框架下的服务贸易自由化水平进行量化评估,以期在一定程度上识别区域服务贸易安排在多边服务贸易安排的基础上取得的进展。     

North-South relations: Alternative policy simulations for the world economy in the 1980s

This article makes projections of the world economy in the North-South context for the period 1981–1990 using a latest global version of a macroeconomic model named FUGI-GNEM type IV 011–62. The model classifies the world into 62 countries/regions, where the North-South interdependence is incorporated into an integral part of the world economy through international economic linkages. Based on alternative simulations, the author presents future images of the North-South interdependent world economy through changes in economic growth rates, employment, wages, prices, money supply, interest rates, public finance, trade, capital movement, international balance of payments, foreign exchange rates, etc., in each country or region. The model forecasts that the real economic growth of the developing countries as a whole in the 1980s will likely be around 4%–7% annual rate according to alternative policy scenarios.     

The welfare state in liquidation?

This paper is about the most recent reforms of cash benefit systems and the sociopolitical debate in eight European countries. The welfare state and the social security system rank high on the political agenda. After many years of economic crisis, with increasingly widespread unemployment and changed family patterns, the welfare system that developed in most western European countries since the end of the Second World War is the focus of attention. In a world of increasing international trade, with competition from countries — in eastern Europe and Asia as well as the United States — which have not developed such comprehensive systems of social security, one of the main issues in the debate is whether western Europe can afford to maintain welfare at the existing level, or whether it is necessary to make fundamental changes. But the discussion also centres on what can be called the welfare state's own internal problems.     

Empirical aspects of protectionism: LINK results

General aspects of protectionism as they are revealed or treated in the LINK system are discussed in this paper. Attention is focused on the macroeconomic aspects of protection, about which relatively little is known: most of the vast body of knowledge on this subject concerns the microeconomic aspects of protection. Some simulations of trade liberalization (opposite of protectionism) and of protection within the context of the LINK system are reported. A movement away from protection would benefit the present world economy but not by a large enough extent to deal effectively with pressing international economic problems; therefore, trade liberalization within the context of a larger program of coordination policy among major industrial countries is examined. Finally, the relationship between protectionism and inflation is explored.     

The transfer of arms and the diffusion of democracy: do arms promote or undermine the “third wave”?

The post–Cold War world has witnessed a proliferation of countries governed by democratic rule. Consequently, optimism has arisen about the prospects for the spread of freedom along with democratic peace and prosperity. Along these lines, many democratic countries have made the active promotion of democracy an explicit goal and a condition for third world countries’ assistance. However, such intentions may be threatened by the ever-present arms trade. Not only do arms transfers play a key role in the foreign policies of many democratic countries, but many developing countries continue to purchase arms from abroad at a steady rate. From the perspective of the developing recipients, this study seeks to empirically assess the impact of the arms trade on democratization. To this end, this paper utilizes an exploratory data technique, locally weighted scatterplot smoother (LOWESS) to examine data for developing countries between 1982 and 1992. By exploring graphically the patterns and distributions revealed by these indicators, the implications of the international arms trade for the spread of democracy are assessed.     

Global adjustment to US disengagement from the world trading system

US trade policy in the Trump administration is protectionist, raising tariffs outside of WTO rules, threatening trade wars, withdrawing from existing trade agreements, and negotiating new bilateral trade deals rather than free trade agreements. The reaction of the rest of the world has been to support the WTO rules-based trading system and to pursue new and expanded regional trade agreements that do not include the US. The result may be US disengagement from the world trading system, with countries diverting trade around the US. We use a global computable general equilibrium (CGE) model to analyze changes in trade and production patterns for a variety of scenarios, including US trade wars. We find that adjustment to US disengagement is feasible—the changes in trade shares as countries divert trade are modest and achievable, with very little impact on the volume of global trade. If the US engages in trade wars with major partners, the best response for other trade partners is to sit out the trade war, accept higher US tariffs, and gain markets from global trade diversion around the US. Finally, because of indirect effects, widespread tariffs fail to benefit the protected sectors—a fallacy of composition in a protectionist trade policy.     

How effective are countercyclical policy tools in mitigating the impact of financial and economic crises in Africa?

Using panel vector auto regression (PVAR) and GMM estimates we provide evidence for the transmission of financial crises to African economies through foreign direct investments and exports. Although many countries resort to stimulus packages to mitigate the impacts of financial crises, we find no evidence for fiscal policy to be considered an effective countercyclical policy tool in the African context. Monetary policy could be an effective tool in mitigating the impact in non-resource rich SSA countries, but not in others. Limited policy space calls for African economies to reconsider their policies towards trade, investment, finance and macroeconomic management.     

Transmissions of real economic shocks across the Pacific Rim economies

We use Asian International Input–Output Tables 1995 in measuring trade dependencies of 10 Pacific Rim economies within a regional general equilibrium model. We develop two sets of metrics in measuring the trade dependencies of the economies. First, we use final demand elasticity of exports in measuring the sensitivities of the economies in the model to autonomous changes in the final demand in any other economy in the region. Second, we use a final-demand-weighted index of export elasticities that are induced by variations in the final demand vector of any economy in the model as indicators of the strength of the shocks transmitted across countries.The estimated coefficients have important policy implications. First, these coefficients identify the most vulnerable sectors of the economies in terms of the export/import dependency. Second, these coefficients may be readily used in bilateral and regional trade negotiations. Using these coefficients, policy makers can provide mutual trade concessions in dampening the effects of real and financial shocks transmitted from the trading partners.     

Globalization in the aftermath of the pandemic and Trump

Covid-19 has exposed and deepened global inequalities: rich countries spent aggressively to sustain their economies and secured early vaccine access while most of the developing world continues to endure a growing disease burden. It also underlined the extent of inter-dependence and weaknesses in some of our international institutions and rules, many of which were established in the now discredited era of neo-liberalism. There is a rich, complex, and difficult agenda going forward for international cooperation. This includes aiding developing countries in restructuring their debt obligations, and guaranteeing that multi-national corporations pay their fair share with a robust international tax regime, better trade and intellectual property regimes, and better global regulatory frameworks for competition and social media. The failures of the past rules have led to political opposition to globalization. The only sustainable and inclusive path out of this pandemic is through cooperation and a re-imagining of globalization.     

The Value of the WTO

Recent developments in global trade include actions by major global traders that lie outside the norms of behaviour of the World Trade Organization (WTO) over the last 20 years. Member frustrations with the slow pace of negotiations and concerns about strategies and behaviours of other members approaches to trade and economic development have created unprecedented stresses on a system of rules and commitments that have long encouraged global trade growth and increased economic integration. In this paper we explore the value of the multilateral trading system, particularly the WTO, and emphasize that the value goes well beyond crucial achievements such as tariff reductions and the prevention of a global trade war, but is also found in increased certainty and transparency. The WTO reduces uncertainty about trade policy thus promoting trade and investment. Membership of the WTO locks in beneficial reform and has a public good nature also fostering trade with non-members. We discuss the importance of the WTO as a multilateral forum to negotiate rules on segments of trade expected to grow in the future such as services and digital trade. We describe how the history of negotiations in the WTO provides useful insights for negotiations on such future topics.     

Embedded Trade: A Third‐Party Effect*

Objectives. Previous work on trade, mostly from an economic perspective, assumes dyadic independence, and thus that trade can be explained by attributes of such dyads. We critique these contentions from the perspective of structural embeddedness, hypothesizing that sharing common third‐party trading partners encourages dyadic trade. Methods. We analyze international trade data of 78 countries in 1975 and 1996, using cross‐sectional and longitudinal regression. Results. Regression analyses support our hypothesis. A BIC analysis suggests that the structural embeddedness variables significantly improve the model fit. Conclusion. International exchange of commodities, like other social interactions, is shaped and constrained by structurally determined opportunities. Thus, an explanation of economic behavior, including trade, is not complete without reference to the triads in which a dyad is embedded.     

The Influence of “Made in China” on the Great Moderation of the Global Economy：An Empirical Test Based on Value Chains*

We have collected data on China’s 22 main trading partners for 1984-2012 and used System GMM to study the influence of “Made in China” on the “Great Moderation” of the global economy. Our research shows that although trade scale, real effective exchange rate, oil prices, fixed capital investment and other variables have significantly expanded global economic volatility, “Made in China” has markedly restrained output growth rate fluctuations in countries around the world and price fluctuations in developed countries, helping the global economy develop with “high growth, low volatility.” “Made in China” is a long-term variable in the context of the global value chain. China needs to take advantage of global value chain restructuring to further upgrade and develop processing and manufacturing industry and expand its presence in the international market. It could choose to adopt a “mirror strategy” and launch trade sanctions targeting counterpart industries or enterprises to counter irrational trade sanctions from the developed countries. At the same time, however, it is important for China to make its own contribution to improve global economic governance and building a new international economic order in the era of global value chains by strengthening its policy coordination with other countries.     

The Social Development Summit and the developing countries

This article discusses some concerns of the 1996 UN Summit on Social Development. Conference organizers identified the three key conference issues as poverty alleviation, social integration of the marginalized and disadvantaged, and expansion of productive employment. The goal of a "society for all" means dealing with the increasing differences between rich and poor countries, the survival of weaker economies in a competitive market system, wide variations in consumption patterns between countries, attainment of political stability while respecting ethnic identity, the rise in social problems among countries with a high human development index, and increasing joblessness. The Human Development Report for 1994 emphasizes human security. Social development is not the equivalent of human resource development nor a side issue of economic growth. The integration of ethnic groups poses social and political problems. There remains a question about what political system and culture would be best for social integration. Developed countries define poverty as the inability of people and government to provide resources and necessary services for people's productive activity. Poverty in developing countries is blamed on colonialism. Globally, developed countries control 71% of world trade. Sharing resources to meet basic needs throughout the world is not an operational ideal. The highest 20% of income earners receive 83% of the world income. The culture of poverty is the strategy used by the poor to survive. Welfare is not an end in itself but does enable the poor to improve their conditions. Development that focuses on productive employment is uncertain. Developed and developing countries do not share similar perceptions of human rights. There is a question as to who should set the priorities for social development. Sustainable social development is related to preservation of natural resources, control of population growth, and promotion of social security.     

Some thoughts on the restructuring of North-South interaction

The theory of international trade presents trade as a positive-sum game for all participants. Yet, most of the negotiations between the developed and the developing countries seem to have been conducted under a perception of reality that views North-South relations as a zero-sum game. The purpose of this paper is to suggest a general framework for institutional and structural changes to benefit all participants. A number of original proposals for international reforms to support equitable development in developing countries are presented. The major element of the proposals include a Land Reform Fund, a rural and industrial development package for LDCs, support for trade liberalization of impacts from land reform countries, and an industrial Assistance Fund to help industrial countries to restructure production pattern.The proposals contain obviously far reaching national and international political implications whose impact is assessed in the concluding part of the paper. There the claim is made that unless both sets of countries find cooperation mutually attractive, they will be unable to embark in development strategies characterized by the highest chance of success and with the fewest economic and social disruptions.