We analyze the interaction of economic and political determinants of free trade agreements (FTA). In addition to standard trade gains, FTAs can promote peaceful relations by offering a political forum and by increasing the opportunity cost of conflicts that disrupt trade. If policy makers believe in such pacifying effects of FTAs, country-pairs with large trade gains from FTAs and high probability of conflict are more likely to sign a FTA. Using data on the 1950-2000 period, we show that this complementarity between economic and political gains is at work in the geography of FTAs. Country pairs characterized by a high frequency of old wars - which we use as a proxy of the probability of conflict - are shown to be more likely to sign FTAs, the more so the higher the trade gains from a FTA. These trade gains are estimated by a theory-driven empirical strategy to disentangle them from the political factors. We also show that, contrary to old wars, recent wars make it more difficult to negotiate a FTA. This suggests the existence of windows of opportunity to lock-in FTAs and peace. Finally multilateral trade openness, because it reduces the opportunity cost of a bilateral conflict, increases the political incentive to sign FTAs.
Free trade agreements (FTAs) have become a prominent feature of the multilateral trading system and an important instrument of trade policy for members of the World Trade Organization (WTO). The proliferation of FTAs is the result of a number of factors, from the economic to the political. East Asia is with no exception involved in the process and witnessing the establishment of multilayered FTAs. Pioneered by the Association of Southeast Asian Nations (ASEAN) in 1992 when it initiated the ASEAN FTA (AFTA), and encouraged by ASEAN+1 (ASEAN plus one country) FTAs, more and more economies in east Asia are involved in FTAs, although the characteristics of these FTAs differ according to their background and circumstances. When the proliferation of FTAs in east Asia benefits the regional trade and economic growth, questions have been raised about Asian noodle bow effect, pointing out multi-layered FTAs in east Asia have created new trade barriers and raised the cost of business in the region. To this end, east Asia needs to progress from the proliferation of multilayered FTAs to a region-wide FTA with wider participation and broader coverage.
National governments are keenly aware of the need for investment in space. Canada, as a formal cooperating state in the European Space Agency (ESA), and Germany, as a leading member state of ESA, are interlinked in Europe's space endeavours. Beyond ESA, Germany and Canada additionally have a strong history of bilateral cooperation on a range of space projects. This paper discusses the novel interdependencies between clear national and now supranational space policies, using the examples of the Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA). The agreement covers most aspects of the EU-Canada bilateral economic relationship and includes space. The paper focuses on international space policies, strategic bilateral co-operation, and technical accomplishments. It takes a closer look at German-Canadian collaboration in space programs and offers some reflection on the effect of both the EU and ESA'S transatlantic involvement in space.
This paper specifically examines the Smuggling that occurred between Indonesia and the ACFTA member countries can be seen from the import-export trade gap. Smuggling occurs because the attempt to avoid tariffs, resulting in the manipulation of incoming documents, both in terms of quantity and price of imported goods. The policy change tariff rates on ACFTA cooperation and increase financial penalties affecting allegedly smuggling. This study uses a fixed effect panel data regression to analyze the policy change. The results obtained are: 1. The reduction of smuggling after the application of policy to reduce tariff rates on ACFTA cooperation, and 2. A decrease in smuggling after the implementation of the policy of increasing the maximum financial penalties. ; peer-reviewed
This thesis contributes to the analysis of optimal industrial and strategic trade policy in the presence of oligopoly and other forms of imperfect competition, so as to make contact with important empirical regularities and policy concerns, such as international R&D collaboration, unionization and free trade. First, in the context of international competition in which R&D plays an important role, we study the consequences of allowing governments to subsidize R&D and coalition deviation on the R&D collaboration networks. Then we investigate the formation of FTAs as a network formation game. While the analysis of welfare effects takes the central stage, we also analyze the nature of trading regimes that are consistent with the incentives of individual countries. We address the issue of conflict of interests among firms, consumers and governments as well. Finally, we integrate the analysis of international R&D collaboration and strategic trade policies, and demonstrate how an asymmetric equilibrium arises from an international trade model with symmetric countries and symmetric firms, and study whether it is sometimes possible to improve national welfare by jointly implementing trade and industrial policies. ; (ECON 3)--UCL, 2006
This thesis contributes to the analysis of optimal industrial and strategic trade policy in the presence of oligopoly and other forms of imperfect competition, so as to make contact with important empirical regularities and policy concerns, such as international R&D collaboration, unionization and free trade. First, in the context of international competition in which R&D plays an important role, we study the consequences of allowing governments to subsidize R&D and coalition deviation on the R&D collaboration networks. Then we investigate the formation of FTAs as a network formation game. While the analysis of welfare effects takes the central stage, we also analyze the nature of trading regimes that are consistent with the incentives of individual countries. We address the issue of conflict of interests among firms, consumers and governments as well. Finally, we integrate the analysis of international R&D collaboration and strategic trade policies, and demonstrate how an asymmetric equilibrium arises from an international trade model with symmetric countries and symmetric firms, and study whether it is sometimes possible to improve national welfare by jointly implementing trade and industrial policies. ; (ECON 3)--UCL, 2006
Even a year or two ago, observers could have been relatively sanguine about the boom of interest in free trade agreements (FTAs). Progress was much slower than people originally expected, and negotiations seemed to drag on without agreement being reached. That situation has now changed. The large economies – not just the United States but also China, Japan and South Korea – are pursuing FTAs. Motivations apparently include their contribution to domestic and international political targets, the mobilisation of reform and dealing with new types of impediments in order to intensify trade flows in the region. ASEAN members are also actively involved but there are doubts about ASEAN's capacity to reach a consensus on trade policy issues. While its members might hope otherwise, a hub-and-spoke outcome in which ASEAN members make up the spokes, and not the hub, is a plausible scenario, and one of the worst in terms of a regional trading regime. We therefore argue the case for the application of a new set of principles to provide a framework for risk management, including progress in the World Trade Organization (WTO) on liberalisation, new WTO rules on regional agreements, higher levels of transparency, and more work on other forms of agreement to facilitate trade. Overall, multilateralisation of preferential tariff reductions should be the main benchmark in any new set of principles for risk management in the tactic of trading with favourites.
Even a year or two ago, observers could have been relatively sanguine about the boom of interest in free trade agreements (FTAs). Progress was much slower than people originally expected, and negotiations seemed to drag on without agreement being reached. That situation has now changed. The large economies – not just the United States but also China, Japan and South Korea – are pursuing FTAs. Motivations apparently include their contribution to domestic and international political targets, the mobilisation of reform and dealing with new types of impediments in order to intensify trade flows in the region. ASEAN members are also actively involved but there are doubts about ASEAN's capacity to reach a consensus on trade policy issues. While its members might hope otherwise, a hub-and-spoke outcome in which ASEAN members make up the spokes, and not the hub, is a plausible scenario, and one of the worst in terms of a regional trading regime. We therefore argue the case for the application of a new set of principles to provide a framework for risk management, including progress in the World Trade Organization (WTO) on liberalisation, new WTO rules on regional agreements, higher levels of transparency, and more work on other forms of agreement to facilitate trade. Overall, multilateralisation of preferential tariff reductions should be the main benchmark in any new set of principles for risk management in the tactic of trading with favourites.
International audience ; Regional Trade Agreements have emerged in an environment of stalled multilateral tradenegotiations. Although the impact of Regional Trade Agreements on international tradehas been well documented, scant attention has been paid to empirical studies exploringtheir heterogeneity from the point of view of deep integration. We set out to determinewhether deeper Regional Trade Agreements promote trade more effectively than lessambitious ones. We generate credible deep integration indicators using two recentlyavailable datasets from the World Trade Organization and the World Trade Institute. Wethen test the effect of depth on trade using a gravity model. We treat additive indicatorsas factor variables and use multiple correspondence analysis to obtain distilled indicatorsof deep integration to offer new insights and confirm recent deep integration findings.We find that deeper Regional Trade Agreements increase trade more than shallowagreements do, irrespective of whether the provisions they contain are within or beyondthe competence of the World Trade Organization.
International audience ; Regional Trade Agreements have emerged in an environment of stalled multilateral tradenegotiations. Although the impact of Regional Trade Agreements on international tradehas been well documented, scant attention has been paid to empirical studies exploringtheir heterogeneity from the point of view of deep integration. We set out to determinewhether deeper Regional Trade Agreements promote trade more effectively than lessambitious ones. We generate credible deep integration indicators using two recentlyavailable datasets from the World Trade Organization and the World Trade Institute. Wethen test the effect of depth on trade using a gravity model. We treat additive indicatorsas factor variables and use multiple correspondence analysis to obtain distilled indicatorsof deep integration to offer new insights and confirm recent deep integration findings.We find that deeper Regional Trade Agreements increase trade more than shallowagreements do, irrespective of whether the provisions they contain are within or beyondthe competence of the World Trade Organization.
The negotiations between Japan and the EU over a free trade agreement are taking place during times in which global economic integration is increasingly questioned. With TTIP on hold and TTP no longer pursued by the US, a successful trade deal between two leading economic powers such as Japan and the EU would be a strong political message: economic integration between countries is still achievable and is favorable because of welfare gains for all participating parties. This report revisits the case for an EU-Japan free trade agreement, and provides estimates of its potential economic impact. It employs advanced quantitative methods to shed light on the economic effects that can be expected from a bilateral trade agreement between the EU and Japan. A key innovation in the proposed approach is to use the recently implemented EU-Korea free trade agreement as a benchmark and to employ the most recent available data in the simulation model. While a less ambitious trade liberalization, which is based only on tariff eliminations, is predicted to yield very low welfare benefits, economic gains turn out to be substantial if the negotiating parties pursue a comprehensive free trade agreement that would reduce non-tariff barriers across various sectors. A conservative estimate, which is modelled on the experience of the EU-Korea trade agreement, puts the welfare effects for Japan at about EUR 9 bn, which is equivalent to 0.23% of Japanese GDP in 2014. At the same time, the EU Member States can expect total income gains worth about EUR 11 bn per year. For Europe, simulations predict that the agreement would have positive value added effects in the pharmaceutical industry, in the food, beverages and tobacco, and in the motor vehicle industries. At the same time, some losses can be expected in the machinery industry. Amongst the services sectors, wholesale trade would benefit the most. In the area of services, minor losses are likely to appear in computer programming or the enter ; Die Verhandlungen über ein Freihandelsabkommen zwischen Japan und der EU finden zu einer Zeit statt, in der die globale wirtschaftliche Integration zunehmend infrage gestellt wird. Nachdem die US-Regierung TTIP und TPP nicht länger verfolgt, wäre der erfolgreiche Verhandlungsabschluss zwischen zwei führenden Wirtschaftsmächten mit einer starken politischen Botschaft verbunden: Ein Öffnen der Märkte zwischen Ländern ist nach wie vor möglich und auch wünschenswert, da es Wohlstandsgewinne für alle Beteiligten erzeugt. Die nachfolgende Studie untersucht ein Freihandelsabkommen der EU mit Japan und schätzt die zu erwartenden ökonomischen Effekte. Der gewählte Ansatz ist besonders innovativ, da er das jüngst errichtete Freihandelsabkommen der EU mit der Republik Korea als Benchmark benutzt und auf die aktuellsten verfügbaren Daten zurückgreift. Während ein weniger ambitioniertes Handelsabkommen, das lediglich Zollsenkungen beinhaltet, nur sehr geringe Wohlfahrtszuwächse verspräche, wären diese im Fall eines sehr umfangreichen Freihandelsabkommens, das auch nicht-tarifäre Handelsbarrieren sektorübergreifend reduziert, ungleich höher. Eine konservative Schätzung auf Basis der Erfahrung des EU-Korea-Abkommens ergibt einen Wohlfahrtsgewinn von 9 Mrd. Euro für Japan, was 0,23% der japanischen Wirtschaftsleistung entspricht. Gleichzeitig können die EU-Mitgliedstaaten einen aggregierten Wohlfahrtszuwachs von 11 Mrd. Euro erwarten. Für Europa berechnet das Simulationsmodell Wertschöpfungszuwächse im Pharmbereich, der Lebensmittel-, Getränke- und Tabakherstellung sowie im Automobilsektor. Gleichzeitig erlitten die Maschinenbauer Verluste. Unter den Dienstleistern würde der Großhandel am meisten gewinnen, während kleinere Verluste bei IT-Dienstleistern und der Unterhaltungsindustrie anfielen. Für Japan werden bedeutende Zuwächse in der Computer- und der Elektronikindustrie vorhergesagt, kleinere Gewinne können der Maschinenbau und ebenfalls die Automobilindustrie erwarten. Verluste hingegen konzentrieren sich auf die Pharmaindustrie und den Großhandel und - allerdings zu einem weit geringeren Ausmaß - auf die landwirtschaftlichen Sektoren und die Lebensmittelbranche. Mit Blick auf die aktuelle Entwicklung innerhalb der EU enthält die Studie auch die zusätzlichen Effekte eines Brexit-Szenarios, demzufolge das Abkommen für Japan mit einer EU ohne dem Vereinigten Königreich weit weniger interessant wäre.
The European Union and Japan have recently launched negotiations about a bilateral free trade agreement as means of economic stimulation, with trade as a driving force to create growth and wealth. Since customs duties are already low, the success of the liberalization process hinges on the potential elimination of non-tariff barriers. The purpose of this paper is to shed light on two possible liberalization scenarios, a less ambitious and a comprehensive trade liberalization. In contrast to classical studies our paper builds on the modern trade literature, accounting for the dominance of intra-industry trade between the two economies and the existence of heterogeneous firms. Furthermore, we model a search-and-matching labor market allowing us to quantify employment effects of trade liberalization. We find that a comprehensive liberalization increases Japanese GDP by 0.86 per cent, whereas the EU only experiences an additional 0.21 per cent of real GDP growth. Most of the growth in real GDP is due to firms' efficiency gains, while unemployment is only reduced by a small amount. Other world regions experience small reductions of GDP due to trade diversion effects.
Following popular protests at home and the fall of the government, Ukraine reversed course andjoined Georgia and Moldova in signing Association Agreements in June 2014. This article hastwo main aims. First, using a gravity model of trade, it estimates the effects of deep and shallowfree trade agreements for the EaP (Eastern Partnership) states with Russia and the EU respectively.Second, by relating the outcomes of the first estimation to the quality of in stitutions, proxied withthe level of democracy and the level of corruption in the selected countries, the paper estimates theeffect on exports of changes in the quality of institutions. The main results show that the EaP coun-tries gain significantly from free trade agreements with the EU but little if anything from free tradeagreements with Russia, and that improvements in the quality of institutions in EaP countries haveplayed an important role in fostering exports. ; The authors acknowledge the support and collaboration of Project ECO2014-58991-C3-2-R funded by theSpanish Ministry of Economy and Competitiveness and of Project 'Production Networks and Economic Integration' fundedby Fundación Caja Castellón-Bancaja.
Why is Chile following such a proactive FTA policy and at the same time promoting the benefits of these type of agreements to other Latin American countries? There is a pre-dominance of economic explanations to analyze why countries pursue an active FTA policy. Yet within an FTA policy, understood as an essential component of a country's foreign policy, strategic and ideational goals are also important. Without downgrading economic explanations, I argue in this article that Chile's proactive FTA policy can also be understood using variables from 'traditional' international relations such as power, governance, and ideas. A framework based on such political-economic strategic issues and value-based ideas provides a better understanding of the country's motivations in implementing such a proactive FTA policy. ; Was sind die Gründe für Chiles derartig aktive Freihandelspolitik und dafür, dass Chile die Vorteile dieser Art von Abkommen gleichzeitig auch anderen lateinamerikanischen Staaten anpreist? Zur Erklärung, warum Länder eine aktive Freihandelspolitik verfolgen, werden überwiegend ökonomische Gründe aufgeführt. Doch bei einer aktiven Freihandelspolitik, die als wichtiger Bestandteil der Außenpolitik angesehen wird, müssen auch strategische und ideelle Ziele Berücksichtigung finden. Ohne die ökonomischen Erklärungen abzuwerten, wird in diesem Beitrag die Auffassung vertreten, dass Chiles aktive Freihandelspolitik auch als Rückgriff auf 'traditionelle' Variablen der internationalen Beziehungen wie Macht, Governance und Ideen verstanden werden kann. Eine Darstellung der politisch-ökonomischen Strategiefragen und der ideellen Aspekte lässt die Beweggründe dieses Landes für eine solch aktive Freihandelspolitik einfacher nachvollziehen.
This paper provides practical techniques to policymakers for evaluating the potential economic effects of a Free Trade Agreement (FTA). To this end, the paper discusses how to apply three methods: (i) trade indicators, (ii) SMART (Software for Market Analysis and Restrictions on Trade) in WITS (World Integrated Trade Solutions), and (iii) the GTAP (Global Trade Analysis Project) model. The paper identifies the different aspects of an FTA that each method can evaluate, describes data sources and software requirements, specifies how to interpret the output from each method, and discusses the strengths and limitations of each method. To illustrate each method, there are examples applied to countries in the Association of Southeast Asian Nations (ASEAN), particularly Cambodia, Lao People's Democratic Republic, and Viet Nam.
