Céline Carrère

Trade Diversification, Income, And Growth: What Do We Know?

This paper surveys the empirical literature on export and import diversification and its linkages with growth. We review widely used measures of diversification and the evidence about their evolution focusing on how export diversification relates to trade liberalization and economic development. We also discuss the linkages between trade diversification and productivity at the firm and industry level, highlighting new advances on the linkages between import diversification and productivity.

Product Specific Rules of Origin in EU and US Preferential Trading Arrangements: An Assessment

Building on earlier work by Estevadeordal, we construct a synthetic index (R-index)intending to capture the restrictiveness on market access due to product specific rules of origin (PSRO)that apply at the tariff-line level. The R-index is constructed for rules of origins under NAFTA and under the single list applying to PANEURO, the new regime applying to all EU preferential trade agreements. The R-index highlights how identical PSRO have different impacts across countries, and how the complexity of PSRO varies across sectors. Having controlled for the extent of tariff preference at the tariff-line level, the R-index contributes to account for differences in utilization rates at the tariff line level. The index is then used to assess composition effects across countries subjected to some set of PSRO and to compute estimates of the compliance costs associated with rules of origin under both regimes

How wages and employment adjust to trade liberalization: Quasi-experimental evidence from Austria

We study the response of regional employment and nominal wages to trade liberalization, exploiting the natural experiment provided by the opening of Central and Eastern European markets after the fall of the Iron Curtain in 1990. Using data for Austrian municipalities, we examine differential pre- and post-1990 wage and employment growth rates between regions bordering the formerly communist economies and interior regions. If the ‘border regions’ are defined narrowly, within a band of less than 50km, we can identify statistically significant liberalization effects on both employment and wages. While wages responded earlier than employment, the employment effect over the entire adjustment period is estimated to be around three times as large as the wage effect. The implied slope of the regional labor supply curve can be replicated in an economic geography model that features obstacles to labor migration due to immobile housing and to heterogeneous locational preferences.

Disentangling Market Access Effects of Preferential Trading Arrangements with an Application for ASEAN Members Under an ASEAN–EU FTA

The paper develops two synthetic measures at the HS-10 level to depict effective market access for a country receiving preferential access and applies these to the market access ASEAN members would receive following the implementation of an FTA with the EU. First, the measures show that current effective market access for ASEAN EBA members is cut in half by the preferences granted by the EU to countries that compete with these countries in the EU markets. Second, the measures show that about one-quarter of the preferential margin under the proposed FTA for EBA members would be lost as a result of preferential access granted to ASEAN GSP members. Third, disaggregated estimates of the restrictiveness of rules of origin confirm that rules are more restrictive for products with higher preferential margins and that ASEAN countries usually face tougher rules of origin in the EU because of the composition of their exports.

Regional Integration and Natural Resources: who benefits? Evidence from MENA

This paper builds on theoretical predictions that show that gains from regional integration are unevenly distributed between resource rich and poor countries. It explores the effects of different integration schemes in the Middle East and North Africa. The results suggest that within the Pan Arab Free Trade Agreement, there is significant trade creation for resource poor countries associated with regional integration, and no evidence of trade diversion. In resource rich countries, however, there is evidence of pure trade diversion in both resource-rich/labor-abundant countries and resource-rich/labor-importing countries. This underscores the idea that regional integration can help to spread the benefits of unevenly distributed resource wealth among the regions economies.

Notes on Detecting The Effects of Non Tariff Measures

Alternative approaches to estimating the effects of nontariff measures (NTMs) on trade flows are discussed and evaluated critically. Recent econometric studies point to three results: (i) NTM restrictiveness measures based on an aggregate of ‘core’ NTMs are more restrictive than existing tariffs and, because of export composition towards agricultural products, in the aggregate, these ‘core’ NTMs limit market access most for low-income countries; (ii) Proxies for individual NTMs have a negative effect on the volume of bilateral trade for the detailed product under scrutiny; (iii) harmonization of standards is trade enhancing. Case studies confirm several of these patterns, and also that perceived severity of NTMs varies across products and across destinations for a given product. Across broadly defined imports at the section level, NTMs are more restrictive than the corresponding tariffs with two-thirds of the ad-valorem equivalent estimates in the 25%-50% range. Technical regulations and non-automatic licensing are the most used single-NTM measures and the restrictiveness of technical regulations increases with income per capita.

The Distance Puzzle And Low-Income Countries: An Update

The “distance effect” measuring the elasticity of trade flows to distance has been found to be rising since the early 1970s in a host of studies based on the gravity model, leading observers to call it the “distance puzzle”. However, this puzzle is regularly challenged by new developments in the specification of the gravity equation or in its estimations. We propose an original survey on the existingmethods used to quantify the distance puzzle – basically the computation of an average distance of trade, a meta-analysis on existing gravity papers and the implementation of recent econometric developments, all on a well-specified gravity equation both in cross-section and panel data. We apply all these methods to a unique large database (124 countries from 1970 to 2006). It appears that if all these new developments can change the amplitude of the increase in the trade elasticity to distance, none solve the distance puzzle. We confirm the existence of this puzzle and identify that it only applies to low-income countries who exhibit a significant rising distance effect on their trade of around 18% between 1970 and 2006 while the distance “puzzle” for trade within richer countries disappears.

Disentangling Market Access Effects for ASEAN Members under an ASEAN-EU FTA

The paper develops two synthetic measures at the HS-10 level to depict effective market access for a country receiving preferential access and applies these to the market access ASEAN members would receive on impact following the implementation of an FTA with the EU. These measures reveal quite a different picture than one that would be gleaned from the more usual ex-ante aggregate approaches. First, the measures show that current effective market access for ASEAN EBA members is cut in half by the preferences granted by the EU to countries that compete with these countries in the EU markets. Second, the small value of preferences is reflected in the pattern of preferential margins, the “significant” preferential margins almost always being for products that account for less than 1/10 of 1 percent of exports at the HS-10 level. Third the measures show that about one quarter of the preferential margin under the proposed FTA for EBA members would be lost as a result of preferential access granted to ASEAN GSP members. Fifth, disaggregated calculations on the restrictiveness of rules of origin not only confirm that rules are more restrictive for products with higher preferential margins, but also that, for a given preferential margin in the EU market, due to the product composition of their exports to the EU, ASEAN countries usually face tougher rules of origin in the EU.

Regional Agreements and Welfare in the South: When Scale Economies in Transport Matter

This paper focuses on two issues that challenge the accepted pessimistic view that regional trade agreements (RTAs) between developing countries in welfare terms by taking into account scale economies in transport. First, how is the standard welfare analysis of an RTA affected by the endogeneity of transport costs (i.e. by the joint determination of trade quantities and transport costs)? Second, what are the long-run consequences of endogenous transport costs for welfare if worldwide free trade is achieved through RTAs? A standard model of inter and intra-industry trade is augmented by a “hub-and-spoke” transport network structure, where the standard “iceberg” transport cost model is contrasted with one in which transport costs depend on the distance between trade partners, the volume of trade, and the level of development. Under a plausible parameterization for scale economies in transport, regional liberalization will have persistent effect on trade flows through an irreversible effect on regional transport costs that improves welfare. Free trade achieved under an RTA leads to permanently higher welfare than under multilateral liberalization.