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Rising public debt everywhere has raised the question of how to reduce debt again in the future. High public debt also seems to be an impediment for the exit of central banks from ultra‐low interest rates and quantitative easing. Historical precedents and proposals have included austerity, haircuts and the generation of inflation. Each way has advantages and disadvantages, including uncertainty about effects and side effects. We approach the issue from an historical perspective, based on case studies of prominent approaches to debt reduction. We analyse debt reduction through economic austerity in Italy, hyperinflation in Germany after World War I, inflation in Argentina since the 1980s, currency reform in Germany after WW II, and financial repression in the United States and the United Kingdom after WW II. Finally, we discuss Ronald McKinnon's order of economic and financial liberalisation as well as the Chicago Plan combined with the introduction of central bank digital currencies as an option for the future. [ABSTRACT FROM AUTHOR]

We offer new evidence on indigenous innovation and intellectual returnees by estimating the relationship between patenting activity by Chinese photovoltaic firms and the presence of corporate leaders with international experience. Our research approach combines data from three sources: the industrial census, international and domestic patent records, and leadership biographical information. Using non-linear methods, we find robust evidence that returnees positively influence patenting activity and promote neighbouring firm innovation. Our analysis suggests that market liberalisation and industry policy influence patent application counts. Controlling for R&D expenditures, we find that firms with returnees in leadership roles do more patenting. [ABSTRACT FROM AUTHOR]

This paper analyses how trade liberalisation affects the markups of Chinese firms based on firm-level production data, highly disaggregated transaction-level product trade data and tariff data at the eight-digit Harmonised System (HS) level. Our results show that there is a pro-competition effect of output tariff reduction, that is decreasing output tariffs relate to a lower markup, and that there is a cost-reduction effect of input tariff reduction, that is decreasing input tariffs relate to a higher markup. Interestingly, there are heterogeneous effects of trade liberalisation on firm-level markups. The cost-reduction effect of input tariff reduction is partially offset by the competition effect of new firm entry in more-concentrated industries. Furthermore, there is a weaker effect of trade liberalisation on processing trade firms and state-owned enterprises. Finally, our results are robust to the use of an instrumental variable approach to control for the endogeneity of tariffs and sample selection. [ABSTRACT FROM AUTHOR]

This paper examines the effects of output and input tariff reductions on within-plant wage skill premium in Korean manufacturing plants. We find evidence that output tariff reduction interacts differently with plants' R&D and investment behaviours, respectively, to affect wage skill premium. More specifically, output tariff reduction increases wage skill premium mostly in R&D-performing plants while reducing it mostly in plants making positive facility investments. While there is weak evidence that input tariff reduction increases wage skill premium, no such interactive effects are found. One story behind our results is that, although both R&D and facility investments may respond to changes in profit opportunities due to output tariff reductions, R&D raises the relative demand for the skilled workers while facility investment, an activity of increasing production capacity, raises the relative demand for the unskilled workers. [ABSTRACT FROM AUTHOR]

This paper uses recent OECD data on services trade restrictions ( STRI) to analyse the relationship between services trade policies and cross-border trade in services. A standard gravity model is enhanced by the STRI indices in a cross-section regression analysis. Services trade restrictions are negatively associated with both imports and exports of services. The surprisingly strong effect on services exports is probably explained by a negative relationship between the STRIs and sector performance indicators. Consequently, services suppliers from less open countries are less competitive abroad. Bilateral differences in regulation are also found to curtail services trade over and above the impact of the trade liberalisation level. At the margin, regulatory differences have a larger effect on trade flows the lower the level of the STRI. [ABSTRACT FROM AUTHOR]

An introduction is presented in which the editors discuss various reports within the issue on topics including Eurozone design and divergent developments, dynamic stochastic general equilibrium (DSGE) model, and financial market integration and financial liberalization in China.

Internationally fragmented production processes have highlighted the need of efficient sourcing from foreign suppliers. This paper aims to investigate how exports of final goods are affected by better access to foreign intermediate inputs. In particular, the paper empirically tests whether expanding the set of available intermediate input suppliers through preferential rules of origin liberalisation affects exports of final goods. We exploit the introduction of the southern Mediterranean countries into the Pan- Euro- Med zone of diagonal cumulation which meant that foreign intermediate inputs could be used from more countries than before without jeopardising the preferential access to the EU. Using a fixed effects specification that controls for detailed levels of unobserved heterogeneity and multilateral resistance, we examine the effect of the new diagonal cumulation possibilities on southern Mediterranean exports to EU-15. We find a positive effect on both export intensity, the value of exports, and export diversification, the number of exported products. Being part of the Pan- Euro- Med zone of diagonal cumulation is associated with a 20 per cent increase in export intensity and a 5 per cent increase in export diversification. [ABSTRACT FROM AUTHOR]

The dynamism of air traffic markets in the Middle East obscures the persistence of restrictions on international competition. But how important are such restrictions for passenger traffic? This paper uses detailed data on worldwide passenger aviation to estimate the effect of air transport policy on international air traffic. The policy variable is a quantitative measure of the commitments under international agreements. The paper analyses, for the first time, not only bilateral agreements, but also plurilateral agreements such as the one among Arab states. The analysis finds that more liberal policy is associated with greater passenger traffic between countries. Higher traffic levels appear to be driven by larger numbers of city‐pairs being served, as well as by more passengers travelling along given routes. To demonstrate the quantitative implication of the estimates, two liberalisation scenarios in the Middle East are evaluated. Deepening the plurilateral agreement among Arab states would lead to a 30 per cent increase in intraregional passenger traffic. Widening the agreement to include Turkey would generate significantly larger gains because current policy vis‐à‐vis Turkey is much more restrictive. [ABSTRACT FROM AUTHOR]

This paper revisits the trade to unemployment nexus for Germany based on the estimation of a model featuring heterogeneous firms and search unemployment. We structurally estimate parameters that match the key moments of the German labour market. Our estimation and calibration are based on a single plant-level data source, that is, the IAB establishment and worker panel. The calibration shows that trade liberalisation reduces unemployment in the long run. In our counter-factual policy simulations, we focus on the effect of labour market policies on the trade and unemployment nexus and we explore how the magnitude of the effects differs under different bargaining regimes. Labour market institutions have stronger effects under collective bargaining. Compared with trade or the bargaining power of unions, the effect of unemployment benefits on unemployment turns out to be rather modest. [ABSTRACT FROM AUTHOR]

Recently, the apex environmental agency of India observed that domestic industrial pollution has been increasing at an alarming rate over the last two decades, and the need to rein in traditional polluting industries. This raises the pertinent question of whether the poor domestic pollution regime has affected the pattern of India's trade in dirty manufactured products in the post-liberalisation era since 1991. We find that on the whole, India has remained a net importer of pollution-intensive manufactured goods; however, there is a distinct trend of increasing specialisation in specific dirty industries especially in the bilateral trade with high-income countries, and to a lesser degree with low-income countries. The USA being India's single largest country trading partner in the post-liberalisation era, we test for pollution offshoring at the finer industry level in US-India bilateral trade. While we find that the pollution haven effect is not significant, India's specialisation in certain dirty manufacturing industries through the last decade remains a disturbing trend. India needs to integrate environmental sustainability within industrial growth urgently, and it is pertinent to implement policies which would reflect the true pollution costs in an industry that is increasingly competing in the international market. [ABSTRACT FROM AUTHOR]

Contrary to the predictions of the 2 × 2 × 2 Heckscher-Ohlin model, empirical evidence shows that the skill premium increased in some developing countries and decreased in others after trade liberalisation. This paper attempts to reconcile the empirical evidence with the theoretical predictions by introducing a model where South-South trade can produce the observed patterns of skill premia in the South. In this context, South-South trade expands the import range of the country that reduces the tariff. This increases the demand for and the cost of skilled workers in the other country. This also leads the country that reduces the tariff to expand its export range and reduce its import range. Therefore, the country that reduces the tariff experiences an increase in its export range, which leads to an increase in the skill premium. As the impact on the import range is ambiguous, it is possible that the other country experiences a decline in the skill premium. Thus, trade liberalisation between Southern countries can cause an increase in the skill premium in one and a decrease in the skill premium in another. [ABSTRACT FROM AUTHOR]

Two decades into the most recent wave of regionalism many of its implications remain to be fully understood. A vast literature has explored the impacts of free trade agreements ( FTAs) on investment flows, but less attention has been given to how existing patterns of investment alter FTA liberalisation. It is contended here that the dynamic interplay between overlapping FTA areas and the investment sunk in them shapes governments' and firms' positions regarding further FTA liberalisation. During trade negotiations, a country may decide to exclude a sector from FTA liberalisation to prevent (concession prevention) future FTA partners from making similar demands. Concession prevention could also occur when a foreign firm, holding a dominant market position in a host country, relinquishes liberalisation demands in an FTA between host and home countries to prevent its current position being eroded if the host country grants similar (or better) concessions to competing firms from other countries in future FTAs. Conversely, investment sunk into a country's sensitive sector in the territory of partners from previous FTAs could pre-empt (concession pre-emption) the protectionist position of that country when it subsequently negotiates FTAs with the investment-source countries. These arguments were tested in the negotiations around the liberalisation of the automotive industry that Thailand and Malaysia had with Japan in their respective bilateral FTAs. The distinct interaction between investment and the FTAs in which these countries participate resulted either in entrenchment of protectionism in the sector or its liberalisation across subsequent FTAs. [ABSTRACT FROM AUTHOR]

This study examines the impact of recent financial liberalisation in China on the financing constraints of publicly listed Chinese firms with and without politically connected CEO/Chairman. Two continuous indices are used to measure the evolution and intensity of financial reforms: a financial liberalisation index and a capital control index. The results indicate that while firms without politically connected CEO/Chairman face significant financing constraints and politically connected firms do not, financial liberalisation has reduced the constraints for the former. Similarly, lower capital control in China's equity market lessens credit constraints for non-connected firms. No statistically significant impact of financial liberalisation is detected with regard to firms that have CEO/Chairman with powerful political background. [ABSTRACT FROM AUTHOR]

This study treats capital flows as risky growth opportunities for both investing and host countries in a standard mean-variance model. Differing optimal trade-offs between growth and volatility on both sides of capital flows are examined on the basis of their different attitudes towards destabilising risk, different considerations of capital market openness and different levels of financial sector development. It is established that growth and volatility may have a positive or negative relationship in theory, but in practice, they are correlated negatively with each other. This negative correlation is significantly non-linear after some normalisation and holds persistently not only for developing but also for developed countries. The study shows that one side's push for financial liberalisation may come across the other side's resistance to it. This conflict of interest can be resolved via negotiations for a compromise equilibrium at which both sides' optimal trade-offs are made internationally compatible. [ABSTRACT FROM AUTHOR]

This paper provides a novel analysis of the South Korean financial crisis drawing on the findings of a unique survey of IMF/World Bank and South Korean experts. The survey reveals that over-optimism and inadequate recognition of financial risks inadvertently led to excessive risk-taking by Korean financial intermediaries. It also indicates that the sources of over-optimistic assessments of East Asian economies were mainly to be found outside East Asia and included the Bretton Woods Institutions themselves, Western media and analysts. In Korea, weaknesses in risk management were the result of (i) lack of expertise in relation to handling the risks associated with capital flows, and (ii) disincentives to manage risks emanating from a relatively successful history of government-provided safety nets for both industry and banking. Financial liberalisation widened risk-taking opportunities, by allowing Korean financial institutions to both borrow from and lend to institutions outside Korea. It also created additional disincentives for managing risk by intensifying competition and eroding bank franchise values. Weaknesses in prudential regulation allowed bank portfolios to become riskier, especially in terms of increased liquidity risk as a result of maturity mismatches between dollar-denominated assets and liabilities. The liquidity crisis, which followed the re-assessment of the South Korean economy by international lenders in late 1997, triggered a full-blown financial crisis because of the absence of an effective international lender of last resort. [ABSTRACT FROM AUTHOR]

Financial liberalisation has often failed in the past due to underestimated problems of structural change. We analyse such changes in lending behaviour of Thai commercial banks during a liberalisation phase by way of unique micro data. Liberalisation has expected positive effects, such as lowering the interest rate spread and collateral requirements. Liberalisation causes structural change, such as a decline in collateral-based and relationship banking. However, the liberal-isation evidence is consistent with more risk taking, such as lending to more risky projects and less protection against default. The Thai experience suggests obvious policy lessons. [ABSTRACT FROM AUTHOR]

This paper uses a complex network approach for the analysis trade effects from regional trade agreements on world trade flows. We use bilateral trade data to compute the network community structure for every year between 1970 and 2000. We compare this to null community structures that emerge from various models based on regional and geographical classifications, the implementation of RTA's and gravity models of trade. Our results show that RTA formation appears to have a cyclical pattern on the world trade network community structure. We document periods where bilateral trade flows and the structure of the world trade network are consistent with those predicted by formation of RTAs. These cycles occur in 1980–86 and 1990–96. At the same time, we document periods in which the pattern in the world trade network is not explained by RTA formation. Two periods, 1986–90 and 1997–2000, show a pattern of bilateral trade flows that moves away from the prediction that results from assuming RTA formation as the driving force in the determination of the world trade network structure. Factors contributing to the latter parts of the cycle during our sample period include formation of regional trade networks in East Asia that account for a significant portion of world trade but are not formalised by RTAs in force. [ABSTRACT FROM AUTHOR]

The goal of this paper is to examine the impact of commodity market reforms on producer price volatility using evidence from the East African coffee market. The results, based on time‐varying volatility models and key summary statistics, show that coffee market reforms in the East African Community (EAC) are associated with changes in producer price volatility and volatility persistence at both country and regional levels. However, reforms were not the only cause of changes in price volatility. The study further shows that reforms had different effects on prices volatilities of Arabica and Robusta varieties of coffee grown in individual EAC countries. These findings have wider implication for commodity market reforms and producer price stabilisation policies in the EAC and coffee producing countries in sub‐Sahara Africa. [ABSTRACT FROM AUTHOR]

The Trans-Pacific Partnership ( TPP) is a new negotiation on cross-border liberalisation of goods and service flows going beyond WTO disciplines and focused on issues such as regulation and border controls. This paper uses numerical simulation methods to assess the potential effects of a TPP agreement on China and also China's inclusion or exclusion on other countries. We use a numerical 11-country global general equilibrium model with trade costs and inside money. Trade costs are calculated using a method based on gravity equations. TPP barriers potentially removable are trade costs less tariffs. Simulation results reveal that China will be slightly hurt by TPP initiatives in welfare when China is out, but the total production and export will be increased. Other non- TPP countries will be mostly hurt in welfare, but member countries will mostly gain. If China takes part in TPP, she will significantly gain and increase other TPP countries' gain as well. The comparison of TPP effects and global free trade effects show that the positive effects of global free trade are stronger than TPP effects. Japan's joining TPP would be beneficial to both herself and most of other TPP countries, but which negative effects on China's welfare when out of TPP will increase further. [ABSTRACT FROM AUTHOR]

Trade in services has been on a substantial positive trend since the last decades, and the number of regional trade agreements ( RTAs) in force has increased regularly overtime. However, negotiations on services remain hesitant even at the bilateral level. Classifying an RTA according to its degree of liberalisation in services allows accounting for 'depth' and heterogeneity issues amongst RTAs. I estimate a gravity equation using panel data covering the period 1999-2007, including bilateral and country-and-time fixed effects. The main results are: (i) amongst RTAs, only the trade agreements covering services have a significant effect on trade in services; and (ii) the deeper, in terms of sectors and of content, the agreement is, the more intratrade the signatory countries have. [ABSTRACT FROM AUTHOR]

Empirical results show that, for the Pacific island states, a free trade agreement with developed countries provides more benefits followed by regional trade agreement within the Pacific and then unilateral tariff reduction. While the agricultural sector expands and the manufacturing sector declines in all scenarios, to avoid second-best outcomes, developed countries need to go beyond the provision of aid for trade/development measures. For developing countries, the way forward with regional trade agreements is to carefully sequence them with regard to the different developed countries involved. This must be accompanied by domestic reform which is necessary but not sufficient for long-term gains. [ABSTRACT FROM AUTHOR]

This paper assesses the prospects for renminbi internationalisation, arguing that the process will encounter significant challenges. Some of these are familiar: the Chinese economy, while large, remains poor; China's financial markets lack depth and liquidity; encouraging international use of the renminbi will require substantial capital account liberalisation, in the course of which things can go wrong. In addition, I highlight a less familiar challenge: China's political system may be an obstacle to renminbi internationalisation. Since the early nineteenth century, the leading international currency or currencies have been those of countries with democratic political systems where there are constraints on the executive, which have built durable alliances, and where creditors are well represented. This is not a prediction that China must have a Democratic Spring before the renminbi becomes a leading international and reserve currency. But it does suggest that the country will have to contemplate significant political reform. [ABSTRACT FROM AUTHOR]

This study examines the Malaysia development record in the context of widespread concerns that the country, and others like it, may encounter major difficulties in graduating to the ranks of high-income economies. It stresses the country's rapid socioeconomic development, built on openness, reasonably competent macroeconomic management and attention to equity issues. It then investigates the country's significant slowdown in investment and economic growth since the late 1990s, and asks whether this trend is related to the more general graduation issue. Our principal conclusion is that the slowdown has less to do with the problem of graduation and more to do with a set of country-specific institutional and political economy challenges. Thus, the current concern within the country that it is in some sense 'stuck in the middle' points to the need for a set of major policy reforms to accelerate growth. [ABSTRACT FROM AUTHOR]

As the Indian financial sector started undergoing extensive liberalization in the 1990s, important lacunae started emerging in the regulatory and supervisory environment, which was inherited from the earlier decades of a highly regimented financial sector. To identify these shortcomings and suggest improvements, the government of India appointed two committees-the High Powered Expert Committee on Making Mumbai an International Financial Centre (2007) and the Committee on Financial Sector Reforms (2009). These two committees made a number of far-reaching suggestions and the primary purpose of this paper is to critically appraise these recommendations, especially in the light of the lessons for financial sector oversight emerging from the recent global crisis. In particular, the paper argues that three of the suggestions advocated by these committees viz. (i) the shift to a principles-based regulatory system, (ii) integrated supervision of all financial trading activities and (iii) divesting the central bank of its bank supervisory responsibility, need to be approached with considerable circumspection in the Indian context. The paper also stresses the importance of maintaining the independence of regulators and supervisors from government interference on the one hand and market influence on the other. [ABSTRACT FROM AUTHOR]

Despite encouraging signs, India's retail market remains largely off-limits to large international retailers like Wal-Mart and Carrefour. Opposition to liberalising foreign direct investment in this sector raises concerns about employment losses, unfair competition resulting in large-scale exit of incumbent domestic retailers and infant industry arguments to protect the organised domestic retail sector that is at a nascent stage. Based on international evidence, we suggest that allowing entry by large international retailers into the Indian market may help tackle inflation especially in food prices. Moreover, technical know-how from foreign firms, such as warehousing technologies and distribution systems, can improve supply chain efficiency in India, in particular for agricultural produce. Better linkages between demand and supply have the potential to improve the price signals that farmers receive and also serve to enhance agricultural and other exports. [ABSTRACT FROM AUTHOR]

A key challenge for macroeconomic policy in open economies is how to simultaneously manage exchange rates, interest rates and capital account openness - the trilemma. This study calculates a trilemma index for India and investigates its evolution over time. We find that financial integration has increased markedly after the mid-2000s, with corresponding limitations on monetary independence (MI) and exchange rate stability (ES). In addition, we empirically confirm that a rise in one trilemma variable is traded off with a drop in the weighted sum of the other two, i.e. the trilemma configuration is binding in India. Finally, we consider the implications of changes in the trilemma index for macroeconomic outcomes. We find that greater MI systemically contributes to lower inflation, so the twin goals of ES and capital account openness may create policy dilemmas in particular economic environments. ES is associated with less inflation volatility, suggesting that there may be secondary benefits channelled through import and commodity prices. In these relationships, however, changes in international reserves are not statistically significant, suggesting that foreign exchange market intervention has not mitigated the trilemma trade-off in India. [ABSTRACT FROM AUTHOR]

The paper reviews the recently completed Trade Policy Review for Malaysia. We find that in the case of Malaysia trade has been liberalised and subjected to structural changes to a very high extent over the last three decades. However, reform has been less effective when it comes to trade-related policies such as investment policies and other national policies that de facto rather than de jure affect competition due to differential treatment of different firms, brands and individuals. This is also mirrored in the faltering levels of investment in Malaysia. An area where Malaysia has been successful is the reorientation towards services. A good example is the tourism industry which is mature and a major export industry in Malaysia today. Nascent service industries such as health, finance, ICT related services and education hold promise to become important export earners in the future. The paper shows that for this new phase of structural change to be truly successful Malaysia must prioritise trade negotiations and integration with her own region and especially ASEAN. [ABSTRACT FROM AUTHOR]

This paper analyses the potential welfare impacts West Africa tends to encounter from liberalising agricultural export subsidies and domestic support in developed and developing countries according to the reform proposals of the Doha Development Agenda. We base our analysis on the July framework scenario which considers a tiered formula that adopts a Harbinson Approach plus sensitive and special product provisions. The results indicate that while the world prices of the major exportable commodities of the region will fall, those of their imports will rise. Subsequently, consumers of nearly all of the commodities analysed encounter potential welfare losses, while almost all producers of these commodities experience potential welfare gains. Consumers are expected to encounter an aggregate loss of about $591.93 million, while a net producer surplus of about $423.78 million is expected to be generated. However, because the gains by producers are insufficient to compensate consumers' losses, the fifteen West African nations considered in the analysis are expected to experience a net welfare loss of about $168.16 million. On the contrary, large developing countries such as Brazil, India and China as well as developed nations like the EU and Japan are expected to enjoy net welfare gains. The net losses accrued to the region imply more poverty and heightened food insecurity as all West African countries faced severe hunger situation in 2010. However, even though these findings conform to other research results indicating net food importing countries will become losers from agricultural trade reform, while net food exporters experience welfare gains, concerns of data quality and reliability that are usually associated with macrolevel analysis render these results more indicative than definitive. [ABSTRACT FROM AUTHOR]

This paper studies the trade of China in the past 150 years, starting from the first opening of China after the Opium War. The main purpose of the paper is to identify what is (and was) China's 'normal' level of foreign trade, and how these levels changed under different trade regimes, from 1840 to the present. We present new evidence on China's foreign trade during the treaty port era (1842-1948), drawn from disaggregated trade data collected by the Chinese Maritime Customs Service, that yields important findings for current research. First, although the volume of foreign trade remained limited initially, there was a notable expansion in the diversity of products, with many new goods being imported into China. Second, the regional diffusion of foreign goods through China was greatly facilitated by the expansions of the port system. Third, the importance of Hong Kong as an intermediary in China's trade has undergone long-term fluctuations suggestive of learning effects. China's recent wave of liberalization has led by the early 1990s to a trade level comparable to the high of the 1920s. While much of China's recent growth in world trade is in line with her income growth, there is no doubt that China's trade openness today, comparable by some measures to Denmark's, is a stunning reversal relative to the pre-1978 and also the pre-1840 period. The paper emphasises the roles that history and institutional change have played in this. [ABSTRACT FROM AUTHOR]

This paper investigates quantitatively the trade-enhancing effect of regional trade agreements (RTAs) under the General Agreement on Trade in Services Article V (services RTAs) by applying a gravity regression analysis to four major services sectors - financial, business, communication and transportation services - while controlling for both country-specific and time-varying importer and exporter fixed effects. The regression analysis covers bilateral imports in services consisting of 20,986 country-pairs in total over six years (2000-05). Our results indicate that sector-specific trade-creating effects of services RTAs are significantly positive without incurring trade-diverting effects, excluding transportation services. Moreover, we find that there is a significant cumulative effect of services RTAs, excluding communication services and a complementary relationship between goods and services imports. In addition, the trade-creating effect of services RTAs is stronger between developed members compared with between developed and developing countries. [ABSTRACT FROM AUTHOR]

This study focuses on whether China's financial system still needs market-oriented transition after the recent global financial crisis, which suggests financial liberalisation may weaken financial stability. We analyse the structure of the financial system and highlight the fact that the current system is not well configured for dealing with fluctuation. The good economic performance over the crisis is mainly built on the administrative resources deployed that counterbalanced the negative effect of short-term fluctuation. The high cost of this makes market liberalisation reform imperative. We take the German financial model as an example to indicate how financial liberalisation and stability can coexist under certain conditions. [ABSTRACT FROM AUTHOR]

This paper investigates three potential sources of Australia's manufacturing productivity gains from trade liberalisation in the mid-1990s: the exit of inefficient establishments, economies of scale, and the reduction in x-inefficiency via employment reduction. We use manufacturing establishment level data and exploit the intersectoral variation in the effective rates of assistance (ERA) to see how businesses adjusted to trade liberalisation during the period. We find the documented productivity gains to be mostly accounted for by the reduction in x-inefficiency through employment shedding in industries experiencing a high degree of trade liberalisation. We find little evidence that the exit of inefficient establishments in highly liberalised industries contributes to productivity gains. In fact, we find that the more productive establishments are more likely to exit, perhaps reflecting product switching by these businesses to make more profitable use of inputs. Similarly, there does not appear to be a strong relationship between the extent of trade liberalisation and output adjustments. However, we do find indicative evidence of an overall productivity-enhancing effect through economies of scale. These findings suggest that, at least for the case of Australia, the ease of making employment adjustments can be crucial for policies such as trade liberalisation to have the desired effect. In addition, trade liberalisation may provide incentives for domestic producers to seek more profitable use of their inputs and to move further downward along their cost curves. We think further studies assessing the productivity gains from product switching and economies of scale effects in both liberalised and non-liberalised industries and focusing on the interplay between labour market policy and firm adjustments would be valuable. [ABSTRACT FROM AUTHOR]

We use a world computable general equilibrium model to simulate 143 potential trade reforms and seek solutions to the issues hampering progress in the Doha Development Agenda (DDA). Inside the domain defined by all these possible outcomes, we apply the axiomatic theory of bargaining and select the Nash solution of cooperative games. The solutions vary according to the objective functions adopted by the trade negotiators. When real income is the objective and services are excluded, or when optimising terms of trade is the objective, the Nash solution is the status quo. Trade liberalisation is feasible only when the negotiators focus on national exports or gross domestic product (GDP). Our assessment of some possible solutions reveals that excluding members having a GDP below a certain threshold improves the bargaining process, regardless of the governments' objective. Formation of coalition, such as the G20, constitutes an option for its members to block outcomes imposed by rich members. We also find that side payments may be a solution, but represent a very high share of the global income gain. [ABSTRACT FROM AUTHOR]

Recent literature has argued that, contrary to the results of a seminal paper by Rose (2004), General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) membership does promote bilateral trade, at least for developed economies and if membership includes non-formal compliance. We review the literature to identify open issues. We then develop a simple extension of the gravity model that gives rise to an extensive country margin of trade separating positive trade from zero trade country pairs. The model is used to identify WTO membership effects at both the intensive and the extensive margins. Empirical estimation of this model, based on Poisson pseudo-maximum likelihood methods with exporter and importer fixed effects, allows us to readdress the empirical issue of whether GATT/WTO membership does or does not promote trade. We find that GATT membership was successful on the extensive margin of world trade but not on the intensive margin. For the recent WTO episode (1995-2008), we find consistent and robust evidence for a substantial trade-creating role of membership which is driven primarily by the intensive margin. WTO membership results in higher bilateral trade of about 40 per cent. [ABSTRACT FROM AUTHOR]

We explore an issue at the nexus of domestic competition policy and international trade, the interaction between goods trade and market power in domestic trade and distribution sectors. We examine the effect of variations in conditions of domestic competition in services on trade volumes in goods in the cases of both linear and nonlinear import demand, including standard form CES-based gravity models of bilateral trade flows. Theory suggests a set of linkages between service-sector pricing and goods trade supported by econometrics involving imports of 22 OECD countries vis-a-vis 69 exporters. Competition in distribution services affects the volume of trade in goods. Additionally, because of interaction between tariffs and pricing, the market structure of the domestic service sector becomes increasingly important as tariffs are reduced. Indeed, depending on the degree of competition, market access concessions on tariffs may be effectively undone in some cases by changes in margins. For exporters, we find that service competition in destination markets matters most for exporters from smaller, poorer countries. Our results also suggest that while negotiated agreements leading to cross-border services liberalisation may boost goods trade as well, they may also lead to a fall in goods trade when such liberalisation involves FDI leading to increased service sector concentration. [ABSTRACT FROM AUTHOR]

This paper examines the 2007 WTO review of Indonesian trade policy. Indonesia undertook a major policy liberalisation in the late 1960s. Serious protectionist pressures emerged in the 1970s but for most of this period, and especially since the mid-1980s, the economy has remained broadly open. We summarise the WTO report, update some of its analysis, highlight its key findings, and point to some trade policy issues that in our opinion warranted greater attention. The main theme of the paper is that Indonesia is a largely open economy, but that this openness on occasion remains precarious. There are both political economy, rent-seeking forces opposed to the current openness and, perhaps more importantly, much of the country's influential public opinion is sceptical of the merits of an open economy and deeper global commercial integration. Nor is there a deeply institutionalised support for openness in the country's bureaucracy and polity. Seen from this perspective, a key question to answer is why the country has remained open, particularly since the deep economic and political crises of 1997–98. [ABSTRACT FROM AUTHOR]

A clear and precise definition of globalisation is crucial to advance contemporary knowledge and policy. When taken to mean internationalisation, liberalisation, universalisation or westernisation, ideas of globalisation reveal little new. Important novel insight is opened when globalisation is understood as the spread of transplanetary – and in recent times also increasingly supraterritorial – connections between people. That said, this conception needs to be carefully qualified in order to avoid globalist excesses. [ABSTRACT FROM AUTHOR]

Israeli authorities have been generally efficient in implementing gradual, mostly unilateral, liberalisation of their country's trade policy regime, with agriculture and related activities being the only major exceptions to the rule. This trend reflects a broad consensus among major political parties in Israel in pursuing liberal trade policy reforms. An alternative interpretation of the liberalising trend is that protectionist pressures from organised sectoral lobbies were either weak or inefficient. [ABSTRACT FROM AUTHOR]

The East African Community (EAC), comprising Kenya, Tanzania and Uganda, came into force on 7 July 2000 with a Common External Tariff (CET) established in January 2005. This Trade Policy Review (TPR) of the EAC is timely as all three countries had implemented significant trade liberalisation since the late 1980s while the CET represented an asymmetric change – Kenya and Tanzania essentially reduced tariffs whereas Uganda increased tariffs. The TPR provides considerable information on the CET and on trade and related policies in each of the member countries. However, the EAC and the TPR missed a number of opportunities: the EAC included no coordinated export promotion or investment provisions, while the TPR says little on the potential for intra-regional trade, and nor does it address the position of the EAC in the economic partnership agreements (EPAs) being negotiated with the EU. This review concentrates on these omissions to explore the implications of the EAC for developments in trade policy in the region. [ABSTRACT FROM AUTHOR]

Mexico plays an important role in the developing-country trade-liberalisation literature because it liberalised early and extensively. Numerous papers analysed changes in Mexican wage levels and inequality after Mexico joined the GATT in 1986. This paper reviews recent papers that analyse changes in wage levels and inequality since the North American Free Trade Agreement in 1994. Two main puzzles emerge. First, wage growth rates are similar before and after NAFTA. Second, Mexican wage inequality, which received much attention after its post-GATT rise, falls steadily after NAFTA. This paper reviews several possible explanations for these two phenomena. [ABSTRACT FROM AUTHOR]

This paper argues that the ‘competitive liberalisation’ of national governments of the past several decades reflects national governments’ expectations of larger trade impacts from regional economic integration agreements (EIAs) than typical ex ante economic models have suggested. Moreover, we show that previous (typically cross-section) ex post empirical evaluations of the effects of EIAs on trade have seriously over- or underestimated the effects, partly due to ignoring the (endogenous) self-selection bias of country pairs into EIAs. Accounting for this bias, we find that economic integration agreements in the Americas have had much larger impacts on trade over the period 1960–2000 than previously found and the ex post estimates are less fragile than those in earlier cross-section analyses. The results shed further light on understanding the causes and consequences of the growth of regionalism in the world. [ABSTRACT FROM AUTHOR]

This paper, considering the economic effects of liberalisation in the telecommunications sector on the Turkish economy, makes use of the empirical studies on the linkages between regulatory regimes and telecommunications prices. Since Turkey is trying to liberalise the telecommunications sector by following the EU approach to liberalisation, the paper considers briefly the regulatory regimes in the telecommunications sectors of the EU and Turkey, determines the ad valorem equivalent of barriers to the telecommunications services sector in Turkey, and derives estimates of the welfare effects of adopting the EU rules and regulations in the Turkish telecommunications sector. It shows that there is tremendous scope for Turkey to benefit from adopting and implementing the legislative, regulatory and institutional framework of the EU telecommunications sector. [ABSTRACT FROM AUTHOR]

The article offers information on the safeguard measures for service industries and summarizes the constituents of the General Agreement on Trade in Services' (GATS) safeguard provisions as compared with other trade agreements such as the General Agreement on Tariffs and Trade (GATT). These safeguard provisions are significant on the trade agreements on services which are gradually becoming prominent on the agenda of multilateral liberalization efforts. Moreover, they are one of the several rules and disciplines which were needed to be applied to heed the issues concerning the modalities of liberalization.

The article talks about the most controversial initiative of the United States trade policy in over a decade, the "Super 301" provision of the Omnibus Trade and Competitiveness Act of 1998. In 1989 and 1990, this mentioned trade policy requires the U.S. Executive to set up its trade liberalization priorities and have a negotiation with foreign government to be able to achieve them. It is noted that the administration of President George Herbert Walker Bush warmly welcomed Super 301 and the U.S. Trade Representative (USTR) officials and the Commerce Department were receptive about. However, several trading partners of U.S. have criticized the provision as unilateral, aggressive, and contrary to the standards of the General Agreement on Tariffs and Trade.

The article offers information on the Uruguay Round of multilateral trade negotiations and the Dunkel draft agreement on agriculture. When these negotiations began in 1986, agriculture stayed outside of the periodic multilateral negotiations to be able to liberalize the General Agreement on Tariffs and Trade's (GATT) sponsored international trade. Strong export interests formed coalitions in several industrial countries including Australia, New Zealand, Canada, and the United States. However, it is noted that the negotiations have faced a possible declining support from the public. In effect, the Director General of GATT, Arthur Dunkel, suggested a comprehensive draft for the final agreement of the Uruguay Round.

The article reports on the possible effects of the Uruguay Round liberalization. The Uruguay Round, which is considered the most ambitious of all the General Agreement on Tariffs and Trade (GATT), is analyzed from two possible conclusions, a comprehensive outcome and a modest outcome. The study used an empirically calibrated real trade model that applies the Armington assumption. It concluded that a comprehensive outcome is preferable to a modest one. However, a modest outcome is also expected to deliver benefits for major trading interests. The alternative of a no agreement is expected to result to losses to the world economy.

The article presents a framework for analyzing the economic costs and benefits of unilateral and multilateral trade liberalization strategies. Economics and political factors should be included in choosing between unilateral and multilateral trade liberalization strategy. The analysis results to increased economic gains in selecting unilateral trade liberalization programs over multilateral liberalization. An overview of the definition of conceptual framework; framework applied in Argentina; and the significance of credit issue is also presented in the article.

The article discusses the sequencing of economic reform including liberalization of the domestic financial market and capital controls; adjustment costs, trade reform and capital controls; capital controls, the real exchange rate and competitiveness; welfare effects, credibility and labor markets. The principle on reform sequencing is based on the liberalization of the domestic market and the relaxation of capital controls. The article also presents an analysis of Latin American experiences regarding their comprehensive liberalization programs.

The article demonstrates the importance of Eastern European reform states' economic relations with the West. It describes the dangers of a single market limited to the European Community. It shows the way to a pan-European economic integration. The transition to currency convertibility must be accompanied by the liberalization of foreign trade. The aim of the liberalization measures should be to abolish the foreign-trade monopoly of the socialist state and to forbid the quota restrictions for exports and for imports.